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Dangerous Dictionary: The problem with 'meta-literalism' in insurance policy interpretation
By Erik Knutsen

October 28 2011 issue

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The meaning of a word can often only be derived from the context in which the word is spoken or written. Yet Canadian courts interpreting insurance policy language frequently perform a strict, literalist construction of that language without any contextual considerations. This trend is much more formalist and conservative than that of most American courts. Perhaps courts here think that a literal response produces more predictable results than a contextual response. Canadian courts appear to take some comfort with this meta-literalism — literalism for the sake of literalism. However, such a formalist approach can actually produce arbitrary, commercially untenable insurance coverage results.

Many Canadian insurance law cases turn on using a dictionary to define insurance policy terms. In Ricketts v. Moore, [2001] O.J. No. 3821, the Court of Appeal for Ontario turned to the dictionary to determine that an eight year-old boy was not covered by a homeowners insurance policy when he drove his toy go-kart powered by a lawnmower engine into someone’s ankle. Rather than consider the context behind why a homeowners insurer excludes from coverage claims arising from accidents with a “motorized land vehicle,” the court instead reached for the dictionary and determined the go-kart fit with the definition of “vehicle.” The exclusion’s purpose is to demarcate that homeowners liability insurance coverage is not supposed to cover what standard automobile liability insurance covers. The court’s dictionary-based decision resulted in an unpredictable gap in insurance coverage for this family (and the victim) because it is fairly obvious that this accident with a child’s toy is not one covered by automobile insurance.

Similarly, in Pietrangelo v. Gore Mutual Insurance Co., [2011] O.J. No. 895, the same court upheld the trial judge’s dictionary reference in defining the word “used.” The court held that landlords could not recover under their property insurance policy when a home was destroyed by fire after a tenant youth experimented with making hashish on a stove. In the face of underwriter evidence that the exclusion clause at issue was targeted at marijuana grow-ops (not youth experimentation), the court held the dictionary definition of “used” was fulfilled because the boy “used” the house for marijuana “processing or manufacture,” which was deemed an excluded risk in the policy.

One of the standard tenets of insurance policy interpretation is that words are to be given their ordinary meaning, not some highly technical meaning. Yet dictionary definitions are often technical and abstract in themselves, frequently requiring further definition of the very terms used within the dictionary definition. People do not talk or think like the dictionary. No dictionary comes stapled to an insurance policy. Using the dictionary to interpret ordinary words found in an insurance policy in a meta-literal fashion may be akin to nothing more than passing on making a nuanced, contextual interpretive decision.

Recent research by Lawrence Solan of Brooklyn Law School demonstrates that there is cause for concern with standard insurance policy interpretation practice. In a 2008 Columbia Law Review article, Professor Solan and co-authors asked sets of lay people and judges to interpret property insurance policy provisions in light of an insurance loss scenario. Solan first found both judges and lay people perceived different meaning in identical insurance clauses. Second, he found both judges and lay people are subject to false consensus bias when interpreting insurance policy language. False consensus bias describes the tendency to perceive one’s own views as the predominant views when in fact they are not. Judges and lay people thought their interpretation of the policy language was correct and that others would also think the same way, even though that really was not true.

This tendency has real problems in insurance law because it affords courts a degree of false confidence in the shared sense of correctness of judicial conclusions about insurance language. This leads to arbitrary, rigid results where context is forsaken for meta-literalism. People read text differently in context-dependent fashion. In Scott v. Wawanesa Mutual Insurance Co., [1989] S.C.J. No. 55, a youth intentionally burned down the family home. His family was unable to recover under a property insurance policy because the policy excluded from coverage losses arising from any “intentional or criminal act” on the part of any “insured.” The youth was an “insured.”

The four judge majority held the exclusion clause was “clear and unambiguous” in ousting coverage. Three judges dissented, determining the exclusion clause was “far from clear and unambiguous,” and would have granted coverage. Judges should therefore pay greater heed to disagreement among other judges and litigants as to meaning of policy language in order to avoid meta-literal decisions that produce arbitrary coverage results.

Instead, courts should ask contextual questions about the particular language at issue. What is the purpose of the language? Does the literal application of the wording produce a commercially sensible response to the insurer’s specific concern? Otherwise, merely resting on dictionary definitions or on an erroneous belief that the language must literally mean what it says in all contexts creates unpredictable insurance gaps. Meta-literalism is a judicial safety blanket to be avoided and instead replaced with a healthy dose of rational commercial understanding of the purposes and contexts behind the policy language.

Erik Knutsen is an associate professor at the Faculty of Law, Queen’s University. He teaches insurance, torts and civil procedure.

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